The Case for Africa

Africa has for the past few decades been thought of as the world's poorest inhabited continent. However in 2013 Africa was the world’s fastest-growing continent at 5.6% a year and GDP [Gross domestic product] is expected to rise by an average of over 6% a year between 2013 and 2023. Growth has been present throughout the continent, with over one-third of Sub-Saharan African countries showing 6% or higher growth rates, and another 40% growing between 4-6% per year. In the past ten years, growth in Africa has surpassed that of East Asia and data suggest that parts of the continent are now experiencing fast growth thanks to an abundance of resources and increasing political stability. The International Monetary Fund (IMF) predicts that seven out of the world’s ten fastest growing economies between 2011 and 2015, will be in Africa.

Many international agencies are gaining increased interest in investing in emerging African economies, especially as Africa continues to maintain high economic growth despite current economic recession in many parts of the world.

Africa appears to be a continent of opportunities. It is home to seven out of ten of the world’s fastest growing economies. And the continent’s economy is accelerating faster than any other, coupling abundant natural resources and increasing regional trade with strong private investment to post stronger FDI [Foreign direct investment] returns than anywhere else in the world. The rate of return on investment in Africa is currently the highest in the developing world.

Africa already has a middle class that’s almost as big as the entire populations of Russia and Brazil and the continent still has the fastest growing population in the world.  With 70% of its population under 35, Africa will enjoy an extraordinary demographic dividend as their energy and talents drive economic growth and development. By 2050, Africa will provide 1 in 4 of the world’s workers, which is twice as many as China.

With Governments across Africa working to improve the business climate, there has never been a better time to invest. By investing in the right way, companies will not only grow their own balance sheets but create jobs, support local businesses and strengthen local communities across the continent. It is possible to fit the US, India, Argentina, China and Western Europe into the land mass of Africa. Africa has an abundance of arable land, making up 60% of the total world’s cultivable land mass. However, that is not all, many other natural resources are to be found in vast quantities in Africa. For example, the continent is home to:

• 89% of the world’s platinum group metals
• 74% of the world’s chrome
• 60% of the world’s diamonds
• 40% of the world’s total gold reserves
• 30% of the world’s mineral deposits

Of course, Africa has always had this but now with many countries experiencing a more stable political outlook and a better educated, and young population; it has the opportunity to make the most of these resources.

Africa still has a lot to combat. Political and social unrest, lack of infrastructure and poverty represent prime hurdles. On the other hand, the broader picture portrays the continent’s progress; optimistic forecasts on economic growth, increasing political stability and advances in its banking systems including better accounting and transparency. A growing middle class in Africa tends to demand more goods & services and local companies filling those needs are thus expanding. The accurate trajectory of African growth appears to be a tough task to predict, however, Sub-Saharan countries seem to be on a promising track.

To sum up, with 60% of the world’s cultivable land mass, an abundance of natural resources, a growing consumer class, and a better educated population the outlook for the continent looks promising.
African stock markets come in different flavours and they require deep understanding to select the appropriate stock exchange. Investing through a mutual fund or exchange-traded fund is a better bet for small investors looking to taste a bit of Sub-Saharan Africa.